US GDP Statistics and How to Use Them

Gross domestic product measures a country's economic output. That makes it the most important economic indicator.

There are five GDP statistics that can give you a snapshot of the health of the United States economy. U.S. nominal GDP is the basic measure of economic output. Real GDP corrects for changes in prices. The GDP growth rate measures how fast the economy is growing. U.S. real GDP per capita describes the standard of living of Americans. The U.S. debt to GDP ratio describes whether America produces enough each year to pay off its national debt. 

The table below gives a snapshot of these five GDP statistics.

Source: Bureau of Economic Analysis

U.S. gross domestic product was $21.535 trillion for the first quarter of 2020. U.S. GDP is the economic output of the entire country. It includes goods and services produced in the United States. To find out the total economic output for all American citizens and companies, regardless of their geographic location, you'd want to look at U.S. gross national product, also known as gross national income.

There are four components of GDP:

1. Personal Consumption Expenditures: All the goods and services produced for household use. This is almost 70% of total GDP.
2. Business Investment: Goods and services purchased by the private business sector.
3. Government Spending: Includes federal, state, and local governments.
4. Net Exports: The dollar value of total exports minus total imports.

U.S. real GDP was $18.975 trillion for Q1 2020. This measure takes nominal GDP and strips out the effects of inflation. That's why it's usually lower than nominal GDP.

It's the best statistic to compare U.S. output year-over-year. That's why the BEA uses it to calculate the GDP growth rate. It's also used to calculate GDP per capita. 

The current GDP growth rate is -5.0% as of Q1 2020. This indicator measures the annualized percentage increase in economic output since the last quarter. It's the best way to assess U.S. economic growth.   

If you look at U.S. GDP history, you'll see this is a devastating loss in growth.  The ideal growth rate is between 2% and 3%. This type of contraction means the economy is probably in a recession.

For Q1 2020, the U.S. real GDP per capita was $57,581. This indicator tells you the economic output by person. It's the best estimate of the standard of living.

To compare the per capita GDP between countries, use purchasing power parity. It levels the playing field between countries. It compares a basket of similar goods, taking out the effects of exchange rates.

The U.S. debt-to-GDP ratio for Q1 2020 was 110%.  That's the total U.S. debt of $23.7 trillion divided by the nominal GDP of $21.5 trillion. Bond investors use this ratio to determine whether a country has enough income each year to pay off its debt. 

The U.S. debt-to-GDP ratio level is too high. The World Bank says that debt that's greater than 77% is past the "tipping point." That's when holders of the nation's debt worry that it won't be repaid. They demand higher interest rates to compensate for the additional risk. When interest rates climb, economic growth slows. That makes it more difficult for the country to repay its debt. The United States has avoided this fate so far because it is one of the strongest economies in the world. 

If you review the national debt by year, you'll see one other time the debt-to-GDP ratio was this high. That was to fund World War II. Following that, it remained safely below 77% until the 2008 financial crisis.  The combination of lower taxes and higher government spending pushed the debt-to-GDP ratio to unsafe levels. Even though the economy is growing at a healthy 2% to 3% rate, the federal government has not reduced the debt. It keeps spending at an unsustainable level.